Is iPad 3 in Jeopardy? Apple Could Lose $1.6 Billion in China Trademark Lawsuit

ANALYSIS

 @redletterdave
on February 07 2012 11:21 AM
Depending on the court's findings, Apple could be fined anywhere from $38 million to the $1.6 billion that China-based Proview is seeking. Yet, more than money, Proview wants Apple to apologize.
Depending on the court's findings, Apple could be fined anywhere from $38 million to the $1.6 billion that China-based Proview is seeking. Yet, more than money, Proview wants Apple to apologize. Reuters

Proview Technology, which currently uses the iPad name on several of its products such as computer monitors, stands to win $1.6 billion and an apology from Apple, the creator of the iPad tablet, for allegedly infringing upon Proview's trademarked name.

Proview International, which owns subsidiaries Proview Technology in Shenzhen and Proview Electronics in Taiwan, originally registered the name iPad in Taiwan and in mainland China in 2000 and 2001, respectively. Apple bought Proview's iPad trademark for $55,000 in 2009 via a company called IP Application Development, but that deal only applied to the trademark in Taiwan. Later, Proview chairman Yang Rongshan said Proview did not know IP Application Development was connected to Apple.

It is arrogant of Apple to just ignore our rights and go ahead selling the iPad in this market, and we will oppose that, Yang said. Besides that, we are in big financial trouble and the trademarks are a valuable asset that could help us sort out part of that trouble.

Proview threatened to sue Apple in October 2010 for damages in China and in the U.S., according to Yang. Reports at the time said Proview registered the iPad name in the EU, China, South Korea, Singapore, Indonesia, Thailand, Vietnam and Mexico, while Apple bought the U.S. iPad trademark from Fujitsu in March.

Proview finally sued Apple in 2011, and Apple retaliated with a counter-suit of its own, arguing that the Cupertino, Calif.-based company was the rightful owner of the iPad trademark. Apple ended up losing that case.

Their copy infringement is very clear, a Proview representative said. The laws are still there, and they sell their products in defiance of laws. The more products they sell, the more they need to compensate.

Apple appealed the case, but the Xicheng district court administration claims the ruling is still under investigation, so no official comments on the case can be made yet.

Depending on the court's findings, Apple could be fined anywhere from $38 million to the $1.6 billion that Proview is seeking. Yet, more than money, Proview wants Apple to apologize.

We ask the court to stop selling and marketing for Apple's iPad in China, said Xie Xianghui, Proview Technology's lawyer. We also demand an apology.

Proview has filed separate lawsuits in local courts in two Chinese cities, Shenzhen and Huizhou, against Apple's authorized retailers and stores.

We are starting with these two cities, and if we are successful in getting iPad sales stopped, we will consider going after Apple resellers elsewhere in China, Xie said.

Officials close to the situation believe Apple will lose its appeals.

We have prepared well for a long-term legal battle, said Xiao Caiyuan, another lawyer representing Proview Technology.

The back-and-forth disputes will likely derail Apple's plans to build more Apple Stores in China, which didn't receive its first retail store from Apple until 2008. In 2011, six Apple Stores in Shanghai and Beijing produced the highest average revenue of any of its 361 global stores.

Apple is such a Goliath and has a good image, so people wouldn't imagine that Apple could possibly infringe on our intellectual property rights, said Xiao.

In order to legally use the iPad name in China, Apple needs Proview to authorize a transfer of the trademark for mainland China. Without a settlement from Proview, Apple stands to take a significant hit in the world's second largest personal computer market.

Proview's attorney Xie hopes her client and Apple can resolve [the dispute] through peaceful talks, but in the meantime, Proview seeks to immediately block the sale of iPads in the two Chinese cities.

Meanwhile, Apple is busy prepping its next iPad, presumably called iPad 3, which is said to debut towards the end of February and go on sale in early March. Citing sources from within the company's foreign supply chains, the iPad 3 will run on an upgraded operating system, iOS 5.1, and feature longer battery life, improved cameras, LTE capabilities, and double the pixel density of its predecessor, with a display resolution somewhere in the ballpark of 2,048 x 1,536 pixels. The next-gen tablet is also said to run on a new quad-core A6 chip, which doubles the power and speed of the A5 chip currently found in the iPad 2 and iPhone 4S.

Even though the Proview lawsuit could cost Apple a considerable amount of pocket change, the cases themselves only ask Apple stop selling the iPad in China's retailers and stores. There is no mention over Apple's continued investment in the name on future products, so Apple will likely keep the iPad name on its next tablet and hope to settle with Proview.

Apple announced its best quarter in the company's 35-year history on Jan. 24, enjoying a net income of $13.1 billion on $46.3 billion in revenue. In the final 14 weeks of 2011, Apple sold 15.4 million iPads, bringing the grand total to about 47.5 million iPads in 2011. China revenue, according to Apple CEO Tim Cook, is one of the biggest markets for Apple, accounting for more than 16 percent of the company's annual earnings.

It's our fastest growing major region by far, Cook said.

Must Read: Apple iPad Will Say Goodbye to Chinese Market Over Trademark Infringement?

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